6 Surprising 1-Star Stocks

Part of being a successful investor is being able to think independently, having strong convictions, and sticking with your ideas. This can be difficult enough when you're looking at a stock the media and analysts like -- after all, in the stock market, there's a seller for every buyer -- but it becomes a thornier proposition when you're looking at a stock that can't get good press or bullish investors anywhere.

Of course, going against popular opinion has led to great returns for many contrarian investors.

In that spirit, I'm here among the Motley Fool CAPS community to find unloved stocks that delivered big gains to shareholders over the past month. Our community of investors had given each of these companies a one-star rating -- the lowest possible -- just 30 days ago:

Stock

30-day return

One-year return

Current CAPS Rating

Vonage (NYSE:VG)

117.3%

(67.2%)

*

Equinix (NASDAQ:EQIX)

24.8%

70.6%

**

Advanced Battery Technologies (AMEX:GBT)

20.4%

894.2%

*

Plug Power (NASDAQ:PLUG)

10.8%

(12.7%)

*

Alexion Pharmaceuticals (NASDAQ:ALXN)

12.0%

95.0%

**

Aventine Renewable Energy (NYSE:AVR)

9.8%

(50.1%)

*

Data provided from Motley Fool CAPS as of Nov. 1.

I am not recommending that you run out and buy these stocks! Their low ratings are big, flashing red flags. CAPS players are adept at picking good stocks, and even better at pointing out stocks to avoid. In fact, an index set up to short the least-liked stocks in CAPS has outperformed more than 97% of all other CAPS players.

In other words, most stocks that are rated with one star in CAPS are likely to underperform. However, CAPS players aren't perfect. They've been overly negative on stocks such as Crocs (Nasdaq: CROX) and DryShips, both of which have delivered seriously impressive returns to their investors over the past year. Are any of the stocks in that table one of those undercover rockets?

Do research? Surely, you jest!That's right -- the way to figure out whether any of these stocks is worth considering for your portfolio (real or CAPS) is to roll up those sleeves and dig in a bit. What we're looking for are stocks that have good fundamentals despite the lack of popularity: a profitable business, good management, and some decent growth prospects.

That said, Vonage may have some of its legal troubles behind it, but I'd like to see the company turn a profit before I give it a hard look. Plug Power is a development-stage company that's likewise well in the red and burning through piles of cash.

Despite its 900% meteoric rise over the past year, Advanced Battery Technologies is probably the most interesting of the group. The company is profitable, trading at under 40 times annualized earnings per share -- taking the year's first-half earnings and assuming it doesn't grow earnings in the second half.

Of course, no growth through the second half of the year would be an extremely conservative estimate given the fact that for the first six months of 2007 the company grew revenue more than 150% year over year and more than quintupled net income. The company is based in China and working on rechargeable battery technology for applications ranging from miners' lamps to cell phones to commuter vehicles. This is by no means a safe, conservative investment, but it has the potential to be a high-risk, high-return situation.

Advanced Battery has gotten more than its share of thumbs-downs on CAPS from some of CAPS best players. However, it has also garnered support of some top players. One such player is hall9999, who described Advanced Battery last June as "a profitable company that is just starting to get big contracts for electric car batteries in China." He also noted that "they should grow quite swiftly." hall9999 has also piqued the interest of other CAPS players through his blog posts about Advanced Battery.

So, what's your take on Advanced Battery? Head to CAPS and let the community of more than 72,000 Fools know what you think. While you're there start your research on any of the other stocks listed above, or any of the 5,000-plus stocks in the database.

Fool contributor Matt Koppenheffer didn't see these particular moves coming, but he's rarely surprised at Mr. Market's general tomfoolery. You can check out Matt's CAPS portfolio here, or visit his blog. He does not own shares of any of the companies mentioned. The Fool's disclosure policy is never going to give you up, it's never going to let you down, and it's definitely never going to run around and desert you.

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